In what will be remembered as the year of the cryptocurrency boom, almost daily there has been a different cryptocurrency whose price skyrockets. Such is the case of **Ripple (XRP)**, which this Friday, December 29, has reached a new all-time high of 1.90 per unit, according to data from CoinMarketCap. With this, it is currently the second largest cryptocurrency by market capitalization. The rise is due to the fact that this week, SBI Holdings, a financial firm in Asia, and SBI Ripple Asia, a joint venture created by SBI Holdings and Ripple, announced that they would use their RippleNet network.
Considered the **cryptocurrency of banks**, Ripple is a virtual real-time payment system based on blockchain technology that is used by financial institutions as a faster and cheaper way than their traditional backup systems, as it allows them to send and receive money and settle **transactions at a speed of between 5 and 10 seconds** (much faster than Bitcoin). In addition, it allows conversion between different currencies and cryptocurrencies. This is the story of Ripple and what are its main differences with Bitcoin.
What is blockchain technology and why is it so important?
Ripple’s story predates the launch of Bitcoin, and the goal of its creators was also to make a decentralized financial system that offered financial sovereignty to individuals and that would grant anyone the ability to “be their own bank.” It was conceived since **2004** by **Ryan Fugger**, who created the first payment system **RipplePay**. Jed McCaleb began developing in 2011 a digital financial system in which transactions were verified by consensus among members of the network, rather than the mining process used by Bitcoin. In August 2012, Jed McCaleb hired Chris Larsen and they approached Ryan Fugger, who ended up handing them the reins of the project.
In September 2012, Larsen and McCaleb co-founded OpenCoin, the San Francisco-based corporation that initiated the development of the Ripple protocol, as well as the exchange network. In July 2013, McCaleb parted ways with the company and, on September 26 of that same year, OpenCoin changed its name to Ripple Labs, Inc.
Ripple ran into trouble with the law in 2015, as it was fined $700,000 by the U.S. Treasury’s Financial Crimes Network for violating the Bank Secrecy Act by acting as a money services company without being properly registered. In October of that year, the company changed its name again to **Ripple**, but it was not until June 13, 2016** that it obtained **license** to operate as a digital currency from the New York State Department of Financial Services.
By September 2016, Ripple had raised $55 million from its early investors, and has since been joined by more dominant participants in the financial system. These include Accenture Ventures, SCB Digital Ventures, Siam Commercial Bank, Santander, Bank of America/Merrill Lynch, UniCredit, Standard Chartered, Westpac, the Royal Bank of Canada and, most recently, BBVA. Last November, Ripple partnered with American Express (AMEX) to create the infrastructure for a payments system based on blockchain technology focused on Business to Business (B2B) payments.
### How it differs from Bitcoin
First, there are three parts to Ripple: the parent company **Ripple Labs** led by CEO Brad Garlinghouse, the payment network **RippleNet** that is now used by AMEX, and the Ripple network’s settlement token, the **XRP**. Ripple’s network of nodes is like the Bitcoin blockchain, but it is not a blockchain as it has no mining operations and only transactions verified by various parties to achieve consensus. That means no new Ripple coins will be created. In fact, Ripple Labs owns 60 billion of the existing 100 billion XRP. That’s why the **success** of the Ripple network ** does not depend on the price** of XRP.
Each Ripple **node** is itself like a local exchange system** or a PayPal, so you can connect traditional and alternative payment systems on a single network. The difference of Ripple with payment systems such as PayPal is that there is **there is no central authority**, since no node has greater capacity than the rest. Rather, it operates as a system that forms a **decentralized mutualist bank**.
### Present and future of Ripple
**Coinbase**, one of the largest digital marketplaces, **does not yet offer Ripple**. To buy XRP, some of the options are Kraken, Bitstamp, ShapeShift, Bitso or GateHub. And, while XRP is used by banks, that doesn’t exempt it from being extremely volatile like the rest of the digital currencies. It has had a great year since it added high-profile partners such as AMEX and, last month, was added by *Bloomberg* to its terminals. However, although this Friday XRP reached all-time highs and has grown 40 times its size throughout this year, **nothing ensures that tomorrow its value will not fall**.
Ripple is not a favorite within the bitcoin community, but it is a favorite within the investor community. If RippleNet manages to make shape as an integral part of the financial industry or the standard protocol for interbank payments, then it could consolidate and continue to rise in price. However, the **odds of its failure are very high**. The main criticism against Ripple is that it will be superseded in the long term by **Stellar (XML)**, an open-source hybrid blockchain that is also used as an equitable payment system for individuals and banks.
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